Scott Coffey Looks at LITH Sanitary District Costs and Benefits

From a comment of Cary Grade School Board President Scott Coffee under the story about costs and benefits of consolidating local governments.

The Lake in the Hills Sanitary District gains supplemental revenue by treating septic tank pumpings.

I reviewed the Village’s financial analysis from their board packet and have a few observations.

The operating savings of $396K are generated mostly through headcount elimination and salary/benefits reduction and yet they indicate that the new positions would all be covered by the union contract.

This sentence is curiously worded: “In addition to operational cost savings, District customers would receive savings through the elimination of the current District property tax levy of nearly $600,000.”

Its written in a manner that seems to indicate that it is an additional benefit in addition to the operating expense savings.

Leaving all other variables unchanged, it seems the Village is signing up to create a deficit of $204K (Lost levy revenue of $600K partially offset by expense savings of $396K).

The analysis indicated that the current sewer rates would remain unchanged.

One might suppose that the current rates would need to rise in order to offset the net effect of losing the levy.

I did not notice any analysis of the impact of moving to a revenue model which has been a blend of usage rates and levy revenue based on EAV, to a model based only on usage.

A condition exists today where a higher priced home essentially pays more for sewer than a home carrying a lower EAV due to the levy component.

If, in general, those properties located in CL and Huntley are higher priced homes as compared to the average LITH home, those residents will see a benefit to the changeover in this model and the average LITH home owner will be absorbing the offsetting cost.

Of course the reverse could be true if the CL/Huntley homes carry an average EAV lower than LITH.

One would need to run the numbers.


Comments

Scott Coffey Looks at LITH Sanitary District Costs and Benefits — 4 Comments

  1. Since my comment has been elevated to its own post, I’d thought I’d delve a little deeper into the topic.

    Piggybacking onto the issue of changing the revenue model to usage-based only, the other potential issue is the potential inequity in revenue burden to be borne by residential customers versus commercial/industrial customers.

    With the proposed elimination of the levy, commercial/industrial properties that currently carry a larger burden due to the higher EAV’s of their properties would probably see a substantial net savings under the new proposal with residential customers making up the shortfall.

    I don’t know if that is a bug or a feature of the proposal or an unintended consequence.

    One would have to run the numbers to determine this impact.

    Next, I believe the Sanitary District currently has about $4.8 million in outstanding debt.

    Debt service payments stretch out through 2039.

    I’d highly recommend contacting bond counsel in order to navigate through the process of legally dissolving the Sanitary District, which is the statutory authority that issued these outstanding bonds.

    As it relates to the plan to eliminate the levy, the following from the Bond disclosure statement may need to be considered:

    “The Bonds are general obligations of the District, for which its full faith and credit has been irrevocably pledged, and are payable from ad valorem taxes levied upon all the taxable property in the District without limitation as to rate or amount (the “Pledged Taxes”), all except as limited by bankruptcy, insolvency, moratorium, reorganization and other similiar laws relating to the enforcement of creditors’ rights and subject to the exercise of judicial discretion.”

    Once again, the advice of Bond Counsel may prove useful in order to prevent against potentially violating the Security covenant by eliminating the levy which produces the “Pledged Taxes” to make the debt service payments, as required in the Bond Statement.

    Lastly, the proposed dissolution of the Sanitary District into the Village of LITH basically disenfranchises the current Sanitary District voters that live in Crystal Lake and Huntley.

    Today they have elected representatives to represent their interests related to matters pertaining to the Sanitary District operations.

    Under the proposal, the Sanitary District operations will be controlled by officials elected only by the voters of LITH.

    Decisions regarding rate increases, fees, capital projects, service, etc. would put Crystal Lake and Huntley residents at the mercy of officials elected by someone else.

    Whether that is important to anybody (or not) would require one to ask the people potentially impacted.

  2. The people who performed the analysis for the village are Jennifer Clough and Shane Johnson.

    Neither have any experience developing a pro forma financial analysis for a business operation.

    They have very little experience outside of balancing a cash register drawer.

    The new mayor Ruzinski has plenty of experience delivering cases of soda to gas stations, but probably doesn’t know what pro forma means, let alone spell the words.

  3. I am confused.

    The LITH Sanitary District Trustees are appointed, not elected.

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